The Federal Reserve System was created by the Federal Reserve Act, and passed by both houses of Congress just prior to Christmas recess on December 22, 1913. Section 5 of the Act calls for a member bank to buy and hold stock in a district Federal Reserve Bank equal to 6% of its capital and surplus. For example, as of 1983, ten major New York City banks owned approximately 66% of the outstanding stock in the Federal Reserve Bank of New York. That Bank in turns own a portion of the stock in the Federal Reserve Bank of the U.S., together with the eleven regional member banks. A review of the major stockholders of the ten New York city banks clearly shows that a few families related by blood, marriage or business interests control those 10 New York city banks, which in turn, hold the controlling stock in the Federal Reserve Bank of New York. In addition, approximately 38% of the stock of the Federal Reserve Bank of New York (as of 1983) was held by banks that are subsidiaries of foreign banks, namely the House of Rothschild which controls the Bank of England. The fact that the Federal Reserve System is controlled by private interests is one of the best kept secrets in American history.
2. The Fed has the exclusive authority to print and issue all U.S. currency. Not correct.
Article 1, Sec. 8 of the U.S. Constitution provides that “The Congress shall have power to borrow money on the credit of the United States…and to coin money, regulate the value thereof, and of foreign coin, and fix the Standard of Weights and Measures.”
According to the National Recovery Act (NRA) decision in the 1930’s, Congress cannot delegate the power to coin money to the Federal Reserve System. However, during the Great Depression and during Franklin D. Roosevelt’s first term as President, the U.S. went off the gold standard and gold and silver Treasury Certificates were gradually replaced by Federal Reserve Notes, which are “coined” by the Fed in violation of the Constitution.
3. Interest on money loaned by the Fed to its member banks is used to reduce the Federal Draft. Not correct.
Prior to 1933, the Federal Reserve Act required that a portion of the earnings of the Federal Reserve Banks go to the government, but the banks never complied. The Banking Act of 1933 legislated that all earnings of the Federal Reserve Banks go to the banks themselves. The assets of the Federal Reserve Banks increased from $143 million dollars in 1913 to $45 billion dollars in 1949, which enriched all of the shareholders of the banks. There is no evidence that the law or the method of accounting of earnings has changed since 1949.
4. The Fed is restricted to an amount of currency it can print by a specified amount of gold held as reserves. Not correct.
The Fed has no restriction on the amount of money it can create since the U.S. went off the gold standard in the 1930’s. As Congressman Wright Patman said in 1964, “The dollar represents a one dollar debt to the Federal Reserve System. The Federal Reserve Banks create money out of thin air to buy Government Bonds from the U.S. Treasury…and has created out of nothing a ….debt which the American people are obliged to pay with interest.”
In 1958 the U.S. owned $700 million ounces of gold. Today the nation’s bullion reserves have dwindled to a mere 281,000,000 ounces ($100 billion dollars) which is miniscule in relationship to the amount of paper currency in circulation and the amount of Treasury debt. The goal of the Fed is to make gold irrelevant as a measure of monetary value so it can continue to print an unlimited amount of paper currency.
5. The books of the Fed are audited on an annual basis and are of public record. Not correct.
Despite numerous attempts by Congressman Wright Patman and others who have called for an audit of the books of the Federal Reserve System, no audit has been made available to the public since the System was founded in 1913. On March 1, 1982, the Arizona State Legislature, as well as a number of other states passed a resolution calling for the abolishment of the Federal Reserve System. All efforts to expose and change the System have been thwarted.
6. The Fed is responsible for loan losses such as the banking debacle of the late 1980’s. Not correct.
Easy, Fed monetary policy in the late 1970’s led to double digit inflation and a prime rate that eventually reached 21.5% in 1981. This caused the collapse of the Savings and Loan Industry.
Congress, accommodating the banking lobby, passed the Garn-St Germain Act to bail out the Savings and Loans. Stimulated by a rush of new money created by the Fed, attractive real estate tax laws, and the authority to directly invest in real estate deals, the Savings and Loans quickly created a speculative bubble of overvalued real estate. By 1990 the massive amount of bad real estate loans caused a banking crisis. The Resolution Trust Corp. was formed to market foreclosed real estate, and the biggest write down of real estate assets since the Great Depression began. Thus, in a period of 12 years, the Fed was obliged to bail out both the Savings and Loan and the banking industries as a direct result of its own monetary policy. Incredibly, the losses were absorbed, not by the Fed, but by the taxpayers and the shareholders of the local institutions that collapsed. Millions of Americans went bankrupt in the early 1990’s and to this day don’t understand what happened.
7. Although the President appoints the chairman of the Federal Reserve Board, the Chairman acts independently. Not correct.
The history of the Federal Reserve System in the U.S. is a study of money and power and its ability to determine world events. A small group of elitists, their successors and assigns have been able to influence public opinion through control of the media, elect or discharge Presidents and politicians, make wars and cause economic booms and busts. Neither the President of the U.S., nor the Chairman of The Federal Reserve Board act independently. They both hold office at the discretion of those who control the Federal Reserve System and those wealthy elitists who are intent on establishing a New World Order. Alan Greenspan said in 1966, “The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit.” Greenspan’s view changed dramatically after he became director of J.P. Morgan and Co. and later the Fed Chairman.
8. The Fed sets interest rates. Not correct.
The markets and the demand for money ultimately determine interest rates. The Fed sets in the Discount Rate (the rate at which member banks borrow from the Fed) and the Fed Funds Rate. (The rate which banks charge each other on overnight funds.) Both of these rates are short-term interest rates. At present the Fed is increasing these rates while at the same time maintaining that inflation is only 2.6% and not a problem. Low rates and an increase in the money supply have fueled a “speculative bubble” in the stock market. Additional increases in rates could slow the economy and cause a market crash.
9. The Fed confines its monetary activities strictly to the U.S. This is incorrect.
The Fed has acted directly as bank of “last resort.” Normally, loans to other countries would be made by the International Monetary Fund, the Bank of International Settlements or other entities that are primarily funded by the Fed. In the case of Mexico, however, the Fed made a loan directly to that country after the President by-passed Congress and issued an Executive Order. Reliable sources indicate that the Fed has recently delivered approximately $40 billion newly printed $100 bills to Russian banks which are controlled by the Russian Mafia. Since 1940 the U.S. dollar has lost 94% of its value. The prolific printing of our currency, the mounting $5.3 trillion in Federal Debt and the widening trade deficit could soon result in the crash of the U.S. dollar and disastrous ramifications for Americans.
10. Americans can benefit from an understanding of how the Fed works. Correct.
Sixty-six percent of the Goss Domestic Product (GDP) in the U.S. is consumer spending, and the sending habits of the American people are greatly influenced by the cost of money. Understanding an overview of how the Fed works and anticipating a major shift in monetary policy can be extremely critical for a business person as well as an investor. The bottom line question is: Whose interest does the Federal reserve serve? The banks or the people? Now you know the answer to that question.
SOURCE: “Secrets of The Federal Reserve” by Eustace Mullins. Available from We Hold These Truths for $15.00.
A People’s Investigation into the Federal Reserve Bank
By Ralph Nader
6 January 2002
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